CAD/GBP, CAD/EUR Exchange Rates Forecast to Continue Tumbling
The Canadian Dollar slid against the Pound (CAD/GBP) and the Euro (CAD/EUR) on Thursday as investor sentiment in the ‘Loonie’ waned. Oil prices have sunk recently, placing downward pressure on the Canadian Dollar. Furthermore, Thursday highlighted a drop in Canadian manufacturing sales.
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The CAD to GBP exchange rate has reached session highs of 0.5562 whilst also encountering lows of 0.5502. Meanwhile, the Canadian Dollar is presently trading at 0.6914 versus the Euro.
The Pound recorded gains on Wednesday when UK unemployment fell below two million for the first time since the Lehman Brothers Bank collapsed in 2008 and devastated markets. The Unemployment Rate dropped from 6.2% to 6.0% in August. Furthermore, Bank of England (BoE) policymaker Martin Weale has reiterated his support for increasing interest rates in the UK.
Weale has voted for an immediate increase in interest rates at the last two Monetary Policy Committee (MPC) meetings along with Ian McCafferty. Policymakers have seen a 2:7 split in the decision for interest rate hikes, but the ratio could be different in next week’s meeting minutes.
However, Weale has commented that the swift drop in unemployment should be a factor the BoE takes into serious consideration when contemplating interest rate increases.
Weale stated: ‘I think it may be sensible for policymakers to give some attention to the rate at which spare capacity is being used up, and not to focus solely on estimates of the amount of spare capacity. My own sense is that the margin of spare capacity is now small and is currently being used up rapidly.’
However, Pound gains were hindered by weak wage growth, an area the UK has been struggling with. Average Weekly Earnings rose by only 0.7% on the year in the three months through August.
Weale continued: ‘That is not to say that I think underlying pay is already growing faster than is compatible with the inflation target. Rather it is that the tightening of the labour market means that, instead of waiting to see wage growth pick up, I think it is appropriate to anticipate that wage growth.’
Meanwhile the Canadian Dollar has suffered losses as oil prices have slipped. Furthermore, Thursday saw the ‘Loonie’ gain little support from Manufacturing Shipments figures, which posted the biggest drop in the past five years.
Manufacturing sales contracted in August by -3.3% after July’s 2.9% growth. August’s figure was the first decline of 2014 and far worse than the -2.0% economists had forecast.
Strategist Mazen Issa commented: ‘A lot of the weakness in August manufacturing should be viewed as a one-off given the influence of autos recently. Nonetheless, the weak data run as of late paired with market turmoil will give ample scope for the bank [Bank of Canada] to remain cautious at next week’s interest rate announcement.’
The Bank of Canada has maintained its 1.0% interest rate for the last four years. Conversely, the European Central Bank (ECB) recently slashed its rates to 0.05%.
The Eurozone is in trouble—an understatement to many. With persistently low inflation, growth flat-lining, German Growth Slowing, Italy in its third recession and general Eurozone recessionary threats shrouding the 18-nation area, investor sentiment in the Euro has taken a hit.
As the prospect of a second Eurozone crisis becomes a real threat, investors watch European Central Bank President Mario Draghi at odds with Germany’s Chancellor Angela Merkel. Draghi and Merkel disagree over the next viable step for the Eurozone, with Germany having a decided distaste for quantitative easing.
Merkel has recently stated that the Eurozone must not become complacent.
Merkel commented: ‘The crisis has not yet been permanently and sustainably overcome because the causes, regarding the set-up of the European economic and currency union and the situation of individual member states, haven’t been eliminated. All – and I stress here once again – all member states must fully respect the reinforced rules of the stability and growth pact.’
While the Eurozone recovery falters, the Single Currency will be extremely vulnerable to volatility.
Canadian Dollar to Pound (CAD/GBP) and Euro (CAD/EUR) Exchange Rate Forecast
The Canadian Dollar will experience an exciting day on Friday with the release of the Bank of Canada’s Consumer Price Index. At present, inflation is expected to remain at 2.1% in September.
Although UK data is thin on the ground on Friday, the Eurozone will see Construction Output figures as well as ECB targeted long-term repayment operation progress and Eurostat’s first Gross Domestic Product Estimate after the 2010 ESA adoption.
The CAD to GBP exchange rate is presently trending in the region of 0.5504.